The flat-screen joint venture between LG Electronics Inc and Philips Electronics NV is one of the world’s largest makers of liquid crystal displays. The company said it expects shipments for the second quarter to rise in the mid-teens from the previous quarter, revised from its previous estimate of mid- to high-20s growth.
Its forecast for LCD TV shipment growth at the end of the second quarter is now expected to be approximately 25% quarter on quarter, approximately 50% less than previously announced.
LG Philips also said the average selling price of LCD panels would fall by a mid-teen percent, compared with its initial forecast of a single-digit fall. It also cut its EBITDA margin forecast to 10% in the second quarter of 2006 from 20% previously, a worst assessment than Wall Street predictions.
Several factors affected the global LCD industry during the second quarter, said president and CFO Ron Wirahadiraksa. First the industry experienced larger than expected price declines across all product categories. In addition, while mid- to long-term demand for flat-screen panels remains strong, we saw weaker seasonal demand during the second quarter, which has increased our inventory to about four weeks, a higher level than anticipated.
Given these factors, we have decided to temporize production to address inventory concerns and better balance our short-term supply with demand, he added.
It seems that demand ahead of the football World Cup has failed to live up to the company’s expectations. That said, a slowdown in sales of monitors and notebook panels is pretty common during the first half of the year.
Like other flat-panel makers, LG Philips has been hurt by tumbling prices of flat-panel displays amid a worldwide supply glut. Prices of liquid crystal displays have dropped at a double-digit rate since late 2004 in an effort to rid the channel of excess inventory. Price cuts were necessary as a result of the persistence of many customers to opt for cheaper CRT televisions, which until recently offered superior picture performance to flat panels.
However, last year saw the tide turn against CRT televisions, and now flat-panel televisions now make up the bulk of new television sales. This is good news for flat-panel makers, which spent a record $13bn on plants and equipment last year. LG Philips, like Samsung Electronics Co Ltd, have invested heavily in seventh-generation LCD production lines. Samsung said in late May that it expected panel prices to fall about 10% in the second quarter from the first.
LG Philips said it plans to release its second-quarter earnings results on July 11.
